UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 27, 2012
ENGlobal Corporation
(Exact name of registrant as specified in its charter)
Nevada |
001-14217 |
88-0322261 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
654 N. Sam Houston Parkway E., Suite 400, Houston, Texas |
77060-5914 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 281-878-1000
________________________________________________________________________________
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 1.01. Entry into a Material Definitive Agreement.
On September 27, 2012 (the "Effective Date"), ENGlobal Corporation, a Nevada corporation (the "Company"), ENGlobal U.S., Inc., a Texas corporation ("ENGlobal US"), ENGlobal International, Inc., a corporation organized under the BVI Business Companies Act of 2004 ("ENGlobal International"), ENGlobal Government Services, Inc., a Texas corporation ("ENGlobal Government" and, together with the Company, ENGlobal US and ENGlobal International, the "Borrowers"), entered into the First Amendment to Revolving Credit and Security Agreement and Forbearance Agreement (the "First Amendment"), with PNC Bank, National Association, as administrative agent ("Agent") for the lenders (the "Lenders").
Under the terms of the First Amendment, the Lenders agreed to forbear, during the Forbearance Period (as defined below), from exercising their rights and remedies, under the Revolving Credit and Security Agreement dated May 30, 2012 (the "Credit Agreement"), among the Borrowers and the Lenders in respect of the Subject Events of Default (as defined below); provided, however, that Agent may, but is not obligated to, collect the accounts and proceeds of other collateral under the Credit Agreement and apply such collections and proceeds to the obligations under the Credit Agreement and impose the default rate of interest under the Credit Agreement. The "Forbearance Period" commenced on the Effective Date and ends on the earlier to occur of (a) 5:00 p.m. (Dallas, Texas time) on October 31, 2012; or (b) the date that any forbearance default (which includes certain events of bankruptcy and any default or event of default under the Credit Agreement other than the Subject Events of Default) occurs. The "Subject Events of Default" include the following existing events of default and anticipated additional events of default under the Credit Agreement: (i) failure to comply with the Tangible Net Worth and Fixed Charge Coverage Ratio financial covenants for the fiscal quarter ended June 30, 2012, (ii) failure to maintain Average Excess Availability for the month ended August 31, 2012, (iii) failure to comply with the Borrowing Base Certificate delivery requirements for the months ending May 31, 2012 and June 30, 2012, (iv) failure to comply with the monthly financial statement delivery requirements for the month ending July 31, 2012, (v) failure to deliver to Agent foreign good standing certificate for ENGlobal US issued by the Secretary of State or other appropriate office of the State of Illinois, (vi) failure to comply with the Credit Agreement as a result of cross default under the EX-IM Transaction Specific Credit Agreement dated July 13, 2011, by and between ENGlobal U.S., Inc. and Wells Fargo Bank, National Association; (vii) failure to comply with the Tangible Net Worth and Fixed Charge Coverage Ratio financial covenants for the fiscal quarter ending September 30, 2012, (viii) failure to maintain Average Excess Availability throughout the Forbearance Period, and (ix) failure to deliver to Agent a foreign good standing certificate for ENGlobal US issued by the Secretary of State or other appropriate office of the State of Illinois before October 1, 2012.
In addition, under the terms of the First Amendment, the Borrowers have agreed to retain, for the duration of the Forbearance Period, a turnaround consultant (the "Consultant") acceptable to Agent and the Lenders, and with a scope of duties acceptable to Agent and the Lenders. The Consultant is to be retained to provide a turnaround or exit plan, in form and substance satisfactory to Agent, by October 15, 2012 (or such later date as may be permitted by Agent in its sole discretion) and services as are reasonably necessary to facilitate Borrowers' ability to operate in compliance with the terms of the Credit Agreement.
In addition, under the terms of the First Amendment, during the Forbearance Period and subject to the other conditions set forth in the Credit Agreement and the First Amendment, Lenders may, in their sole and absolute discretion, make revolving advances to Borrowers in such portions and at the times set forth in the Credit Agreement, which advances will bear interest at the default rate of interest. In consideration of the First Amendment, Borrowers agreed to pay the Lenders an amendment fee of $35,000.
Item 7.01. Regulation FD Disclosure.
On October 1, 2012, the Company issued a press release announcing the First Amendment. The press release is filed as Exhibit 99.1 to this Form 8-K, and is incorporated herein by reference.
In accordance with General Instructions B.2 and B.6 of Form 8-K, the foregoing information, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1
Press Release dated October 1, 2012
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ENGlobal Corporation
(Registrant) |
||
| October 1, 2012
(Date) |
/s/ NATALIE S. HAIRSTON
Natalie S. Hairston Chief Governance Officer, Corporate Vice President - Investor Relations, and Corporate Secretary |
| Exhibit Index | ||
| 99.1 | Press release dated October 1, 2012 | |
EXHIBIT 99.1
HOUSTON, Oct. 1, 2012 (GLOBE NEWSWIRE) -- ENGlobal Corporation (Nasdaq:ENG), a leading provider of energy-related project delivery solutions, announced today that it has reached a forbearance agreement with its lender under the Company's senior secured revolving credit facility with respect to existing events of default and anticipated events of default. The forbearance agreement allows the Company time to hire a consultant and develop a turnaround plan by October 15, 2012. ENGlobal has hired a consultant and intends to work with them to develop a plan to restore the Company's compliance with the credit facility. The forbearance agreement extends through October 31, 2012.
About ENGlobal
ENGlobal (Nasdaq:ENG), founded in 1985, is a provider of engineering and related project services principally to the energy sector throughout the United States and internationally. ENGlobal operates through three business segments: Automation, Engineering & Construction, and Field Solutions. ENGlobal's Automation segment provides services related to the design, fabrication & implementation of process distributed control and analyzer systems, advanced automation, and related information technology. The Engineering & Construction segment provides consulting services relating to the development, management and execution of projects requiring professional engineering as well as inspection, construction management, mechanical integrity, field support, quality assurance and plant asset management. ENGlobal's Field Solutions segment provides project management and staffing for right-of-way and site acquisition, inspection, permitting, regulatory, and legislative outreach. ENGlobal has approximately 1,900 employees in 12 offices and 9 cities. Further information about the Company and its businesses is available at www.ENGlobal.com.
Safe Harbor for Forward-Looking Statements
The statements above regarding the Company's expectations regarding its operations and certain other matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws and are subject to risks and uncertainties including, but not limited to: (1) our ability to comply with the terms of the forbearance agreement with respect to our credit facility with PNC Bank, including our ability to develop a plan to restore compliance with the terms of such credit facility; (2) our ability to successfully close the sale of the Field Solutions segment and realize to benefits of the disposition; (3) our ability to obtain the cure or waiver of defaults under our credit facility with PNC Bank and our existing letter of credit facility with Export-Import Bank of the United States; (4) our ability to achieve profitability and positive cash flow from operations; (5) our ability to collect accounts receivable and process accounts payable in a timely manner; (6) our ability to respond appropriately to the current worldwide economic situation and the resulting decrease in demand for our services and competitive pricing pressure; (7) our ability to achieve our business strategy while effectively managing costs and expenses; (8) our ability to accurately estimate costs and fees on fixed-price contracts; (9) the effect of changes in the price of oil; (10) delays related to the award of domestic and international contracts; (11) our ability to execute to our internal performance plans such as our productivity improvement and cost reduction initiatives; (12) the effect of changes in laws and regulations with which the Company must comply and the associated costs of compliance with such laws and regulations, either currently or in the future, as applicable; (13) the effect of changes in accounting policies and practices as may be adopted by regulatory agencies, as well as by the FASB; (14) the effect on our competitive position within our market area in view of, among other things, increasing consolidation currently taking place among our competitors; (15) our ability to win new business and convert those orders to sales within the fiscal year in accordance with our annual business plan; (16) achievement of our acquisition and related integration plans; and (17) the uncertainties of the outcome of litigation. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors detailed from time to time in ENGlobal's filings with the Securities and Exchange Commission. In addition, reference is hereby made to cautionary statements set forth in the Company's most recent reports on Form 10-K and 10-Q, and other SEC filings.
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CONTACT: Natalie S. Hairston
(281) 878-1000
ir@ENGlobal.com